97% of Detroit Taxpayers Could Get a Reduction in Property Taxes

Detroit, MI. (Source: Flickr/Ann Millspaugh.)

Earlier this year, Detroit considered implementing a split-rate tax to tackle its ever-growing issue of blight. This would shift the property tax burden to the value of the land itself instead of improvements (such as buildings) on the land, encouraging needed reinvestment. Now, Mayor Mike Duggan has announced details of a land value tax plan. 

By switching the current tax system to the land-based plan, 97% of Detroit homeowners will see a 30% reduction in their taxes. As reported by Planetizen, this means the average homeowner would have their annual bill knocked down by about $250. Homeowners with properties worth $100,000 could see a nearly $900 tax cut.

Why the Proposed Change?

“For more than 50 years,” said Duggan, “the property tax system has two defining characteristics: blight is rewarded and building is punished.” 

By taxing land higher than buildings, the incentives will change. Residents will no longer find their property tax bill has increased when they build or make upgrades. And those with empty plots of land in choice locations will simply be paying a higher price for wasted space, thus encouraging owners to make their property something. Or sell to someone who will make use of the land. 

This change could help deter Detroit’s problems with land speculation, and encourage owners to build or sell to someone who will. Land speculators, many made up of non-Detroit residents, are said to own about 20% of local parcels. “And many would rather sit on low-taxed property — some potentially owe[ing] less than $30 a year in property taxes — than build new homes or business property,” the Tax Policy Center says.

Check out this previous article to read more of the changes Detroit could see if they adopt a new property tax system.

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